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20 | Kitchen & Bath Design News August 2014 W e've all heard the phrase: "Knowl- edge is power." In the business world, we gain knowledge, and there- fore potential power, by learning new things through such activities as reading, researching, networking, coaching, training, taking continuing education cours- es and attending seminars/ conferences. I say "potential power" because not everyone who has gained knowledge recognizes the power gener- ated by that knowledge – or, they may not have leveraged the power to accomplish a particular objective. You can also gain knowl- edge through the activity of planning. For example, sales designers in our industry conceptually plan a kitchen project to positively impact all the needs of their client. How- ever, designers with advanced selling skills recognize the value of going to the next step: an early engagement with their client to collabora- tively plan a budget for one possible design concept. In doing this, they gain the knowledge of their cli- ent's satisfaction with both the conceptual "plan" and the agreed-upon "price." With those twin, quick approvals comes the power to ask for a signed retainer agreement and check. Marketing experts declare that this is the perfect moment to close the deal. As prevalent as planning is in the daily lives of kitch- en/bath sales designers, it's almost non-existent among many design firm owners in our industry. Apparently, there isn't enough time in the day for business planning or a high enough regard for the outcomes from this activity. As proof, just ponder one key statistic from a recent SEN/ KBDN Dealer Survey, which showed that fully 83% of kitchen/bath own- ers do not bother to prepare an annual budget for their business. That's the equivalent of a sales designer selling a $1,000,000 kitchen project without a detailed foor plan and estimate, yet expect- ing the end result to be not only a perfect ft, but also to achieve the company's desired gross proft margin. Unfortunately, it's just never going to happen! PLANNING TO GAIN KNOWLEDGE & POWER If there's one key discipline holding back the kitchen/ bath industry from spec- tacular growth, it has to be the collective absence of business planning on the part of independent design firm owners. Frankly, our industry has probably failed in demanding this activity of owners because it has failed in furnishing the requisite business management train- ing programs. Neither trade associations nor manufac- turers have developed, or supported, a comprehensive, efective and industry-specif- ic business school. And dealer/owners have failed themselves, their em- ployees and their families by not making the time – and the effort – to learn what they don't know about run- ning a successful business. Business management seminars in this industry typically show weak at- tendance where design seminars are sold out. Own- ers and their personnel have pretty much settled for learning everything there is to know about good design and fashionable products – two arenas in which they are already expert. A long time ago, a retired millionaire mentored me in the ways of becoming a successful businessperson. "Ken, you are a fne sales- person," he said. "But you will never be wealthy until you become as fne a busi- nessperson. And that starts with good planning, because it gives you the knowledge to make smart business decisions. Smart business decisions give you the power to grow your top and bottom lines. Wealth comes from earning a bigger bottom line each succeeding year. It's as simple as that." PLAN WITH THE END IN MIND Long before Stephen R. Covey coined the phrase "begin with end in mind" in his popular self-help book The 7 Habits Of Highly Ef- fective People , old Stanley Blanchard preached that philosophy to me way back in the early 1970s. Then he showed me how to apply it to my kitchen/bath frm in so many diferent ways. Here are just a few that have made a positive impact in scores of kitchen businesses in which I have had the privilege to coach their owners. ➊ Cash Discounts. Most dealer/owners pay scant at- tention to 2% cash discounts, which quite a few cabinet manufacturers ofer, or per- haps they don't have enough money in their checking ac- counts to take advantage of them. However, fnancially savvy people like Stanley Blanchard always advise people to push the numbers out to the end to understand the true value of something like a cash discount. For ex- ample, with vendor payment terms of "2%, 10 days, net 30," you need to project out what that 2% cash discount means within the context of an annualized return on investment (ROI). The al- gebraic equation is simple: 2% x 360 Business Days/ Period of Investment (30-10 or 20 days) = 36% ROI. Think about that percentage for a moment. When was the last time that any investment of yours – a savings account, mutual fund, or a piece of real estate – ever came close to delivering that high of a return? It's huge! Having gained such ROI knowledge, do you think it might give you the power, and the mo- tivation, to seek an adequate credit line so you could take these cash discounts on a regular basis? ➋ Annual Budget. The best way to realize your annual revenue and net proft goal is to plan for it as carefully as you would for a client's kitchen project. Think of a company budget continued on Page 22 "As prevalent as planning is in the daily lives of kitchen/bath professionals, it's almost non- existent among many design frm owners, some of whom don't even prepare an annual budget. That's the equivalent of selling a million dollar kitchen project without a detailed foor plan and estimate – and then expecting the end result to not only be a perfect ft, but to achieve the desired gross proft margin." Bettering Your Bottom Line { Ken Peterson, CKD, LPBC } Read past columns and features and send us your comments about this article and others by logging onto our Web site: www.ForResidentialPros.com Planning for Your Business: All the Way to the End Taking the time to create a careful, complete and well-thought-out business plan – one that truly plans things right out to the end – will help you to grow your business, both in the short term and longer term.